According to the International Monetary Fund, despite a resilient post-pandemic economy, organizations must navigate a landscape rife with transformative forces.
Climate change, geopolitical fragmentation, ongoing conflicts, the rapid pace of digitalization, cyber risks and the rise of artificial intelligence (AI) all contribute to an environment of high uncertainty. As companies strive to adapt and thrive amid these challenges, the question of how to grow becomes more critical than ever.
This is where the “Build, Borrow or Buy” framework, developed by Laurence Capron of INSEAD and Will Mitchell from the Rotman School of Management, gains significance. By offering a structured approach to evaluating growth strategies, this framework empowers organizations to make informed decisions on how to expand their capabilities.
“Build, Borrow or Buy” helps businesses chart a path forward. Should they build resources internally or borrow them through strategic partnerships? Should they buy them through acquisitions? In today’s complex business landscape, this framework not only provides clarity but also enhances agility in response to rapidly changing conditions.
The growth challenge
The question of how to grow is one of the most significant challenges for executives.
One misstep in growth strategy can lead to stagnation or even decline. The right choice can propel a company to new heights. However, many firms tend to overly focus on one growth strategy, whether it be organic growth, mergers and acquisitions (M&A), or forming strategic alliances.
A one-dimensional approach can lead to an “implementation trap,” where firms continue to pursue the same strategy despite poor results. They will ultimately fall behind more agile competitors.
The importance of a holistic approach
To navigate the growth dilemma effectively, companies must start by asking the right questions.
Capron and Mitchell emphasize the importance of understanding a firm’s current resources and capabilities to determine the most effective growth strategy. Their research reveals that a company’s ability to discern the best resource pathways for growth can significantly influence its success. This leads us to the framework of resource pathways, which revolves around three essential strategic questions:
- Build: Do you have the internal resources for developing new capabilities required for growth?
- Borrow: Can you obtain the targeted resources via an effective relationship with a resource partner?
- Buy: Do you need broad and deep relationships with your resource provider?
By systematically addressing these questions, organizations can better evaluate their options and make informed decisions that align with long-term strategic goals.
Building: fortifying the power of internal development
The “Build” strategy focuses on leveraging existing internal resources to develop new capabilities. This approach is beneficial for firms that have strong R&D capabilities or a culture that fosters innovation. Companies like Google and Apple exemplify this strategy, continually investing in their internal teams to create groundbreaking products and services.
However, building from within can be time-consuming and resource-intensive. It requires not only a clear vision of where the company wants to go but also the right talent, technology and financial buy-in from stakeholders to achieve that vision. Organizations must assess whether they have the necessary resources and expertise to innovate effectively. If they do, building may be the most sustainable growth path.
Borrowing: harnessing strategic partnerships
The “Borrow” strategy emphasizes collaboration and alliances. This approach allows companies to tap into external expertise, resources and capabilities.
Strategic partnerships can take many forms, including joint ventures, licensing agreements or research collaborations. For instance, companies in the pharmaceutical industry often collaborate with research institutions to accelerate drug development. They share the risks and costs involved, as well as the rewards.
Partnerships may also involve engaging external talent, such as renting a CPA or hiring a fractional CFO. Rather than hiring directly, some companies may choose to hire talent through an Employer of Record (EOR). Cross-border solutions like this can help companies tap into talent without setting up an entity abroad or managing global payroll.
The effectiveness of borrowing hinges on establishing strong relationships with resource partners. Organizations must ask themselves whether they can find partners that complement their strengths and fill gaps in their capabilities. If so, borrowing can provide a flexible and cost-effective means of achieving growth while minimizing risk.
Buying: acquiring for rapid expansion
The “Buy” strategy involves acquiring existing firms to gain immediate access to new resources, markets and technologies. This approach can provide a quick path to growth, allowing companies to scale operations, enter new markets or diversify their product offerings. For example, Facebook’s acquisition of Instagram and WhatsApp enabled it to expand its user base and strengthen its position in the social media landscape.
While buying can accelerate growth, it also comes with challenges, including cultural integration and the complexities of post-merger integration. Companies should carefully assess if the acquisition aligns with their long-term strategy. They must also evaluate their ability to manage and integrate new resources effectively.
While acquisitions can accelerate growth, they also pose challenges like cultural integration and complex post-merger processes. Operational readiness is critical, particularly prioritizing payroll registration, local payment methods and compliance with local laws. By addressing these areas, companies can achieve a smooth integration and maximize acquisition value.
Finding the right path
Ultimately, the decision to build, borrow or buy depends on a company’s unique situation, resources and strategic goals.
Companies that embrace a holistic approach to growth –leveraging their internal strengths while also considering external partnerships and acquisitions – are better positioned to thrive in an increasingly competitive landscape.
As you reflect on your organization’s growth strategy, ask yourself: What path will lead us to sustainable success?
Contact us to talk with an international expansion expert about what strategies—build, borrow or buy—will best support your growth goals in today’s complex business landscape.